What is STP Phase 2?

Most Australian employers are familiar with Single Touch Payroll. STP Phase 2 is the next stop on this journey. Where phase one was a way of reporting employees’ tax and super to the ATO, STP Phase 2 expands the program to capture more detailed information. This will reduce the compliance burden for employers and individuals and help the admin side of things for Services Australia.

Although you need to provide the ATO with more information, the way you submit STP reports won’t change; how much it differs from your current process will depend on the nuances of your unique business and employees.

What is the Start Date for STP Phase 2 Reporting?

The ATO set a date of 01 January 2022 as the ‘mandatory start date’ for STP Phase 2 Reporting, however they are taking a flexible approach to transition and will not apply any penalties for genuine mistakes for the first year of Phase 2 reporting until 31 December 2022.

Digital Service Providers (DSPs) such as Xero and MYOB can apply for deferrals on behalf of their users while they develop the technology to allow for STP Phase 2 Reporting.

Xero & STP Phase 2

All users who report for STP to the ATO via Xero have deferral in place until 31 December 2022. Xero are rolling out STP Phase 2 changes in three stages over the year.

Stage one: The first stage will start being available within Xero from mid-April onwards. This will include updates to the way new employee records are set up in payroll, ensuring STP Phase 2 compliance.

Stage two: The second stage will begin rolling out within Xero mid-year. This will extend the set up process to enable the transition of existing employee payroll records to STP Phase 2 compliance. This will provide ample time for you to ensure all employees in your business are correctly set up for STP2 Phase 2 compliance.

Stage three: The final stage will be available in the second half of this year. It will see the new pay items from STP 2 finalised in Xero, with product support to review existing pay items that may need to be changed to those stipulated by STP Phase 2.

Aspire will continue to work closely with Xero on the rollout of STP Phase 2 and will support our payroll clients to ensure payroll settings and pay items are up to date for reporting come 01 January 2023.

In the meantime, you can keep up to date with the rollout via the Xero Payroll STP Phase 2 Hub within Xero (Payroll>Single Touch Payroll>STP Phase 2), and by downloading the Xero Guide to STP Phase 2.

Other Accounting Software

If you use a software provider other than Xero, please make yourself familiar with the STP Phase 2 deferral date they have in place with the ATO as well as any transition requirements you may need to action as part of the new reporting specifications.